NZD little changed near 12-month high

The New Zealand dollar was little changed near a 12-month high and may rally further if Britons vote the way the bookmakers are indicating and opt to remain in the European Union.

The kiwi traded at 71.80 US cents as at 5pm in Wellington, having earlier gained to as high as 71.88 cents from 71.45 cents on Wednesday. The trade-weighted index was at 75.99, having briefly touched a 13-month high of 76.06, from 75.87 on Wednesday.

The latest two polls show the 'leave' option, or Brexit, has slightly more support than Britain remaining in the European Union, although pollsters say the outcome is too close to call.

"The financial markets seem to be completely at odds with the uncertainty that we're seeing through the polls - it's a binary outcome - either in or out," said Mark Johnson, senior foreign exchange and derivatives dealer at OMF.

"We're knocking on the door of 72 (US) cents at the moment and we might be looking at 74.5 as the next level."

He said if the 'remain' vote wins and the New Zealand dollar rallies, the gains could be amplified by "short covering" as traders who had bet on a Brexit and a weaker kiwi are forced to buy back their positions. If the Brexit option wins, "there's going to be a risk-off tone" in financial markets, he said.

Longer term, an elevated kiwi poses questions for the Reserve Bank and may encourage it to cut interest rates again because of the damping effect on imported inflation, which remains well below the bank's target band.

The kiwi slipped to 48.55 British pence from 48.64 pence. The kiwi fell to 95.45 Australian cents from 95.71 cents on Wednesday. It was little changed at 63.32 euro cents from 63.41 cents, rose to 75.12 yen from 74.61 yen and gained to 4.7222 yuan from 4.7022 yuan.

New Zealand's two-year swap rate was unchanged at 2.31 per cent and the 10-year swaps rose 1 basis point to 2.86 per cent.